Munis close mostly flat as holiday-shortened week kicks off; Dasny preps $684.28 million sale

By Sheri Kasprzak

New York, May 31 - Municipals got off to a slow start following the Memorial Day holiday, but primary action is expected to pick up as the week moves on, said market insiders. Yields were seen mostly flat Tuesday with a slightly firmer tone thanks to a boost to the Treasuries market.

"Like most U.S. markets, tax-frees cruised into the holiday weekend with little action and virtually no change in yields, though things should heat up this week and next," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"The new issue supply is building with $3.7 billion [on] tap this week, led by two New York deals."

Dasny to tap market

The larger of the two New York deals comes from the Dormitory Authority of the State of New York, which is set to price $684.275 million of series 2011 general purpose state personal income tax revenue bonds Thursday via competitive sale.

The deal includes $653.85 million of series 2011A tax-exempt bonds and $30.425 million of series 2011B taxable bonds.

The bonds include 30 years of serial maturities.

"Whereas municipal issuers have historically tended to term up the longer maturities, scheduling sinking fund payments instead of maturities, the steepness of the yield curves makes serialization ... more interest cost effective than blocks of term bonds," said Schankel of the Dasny serial bonds.

Proceeds will be used to finance some state matching grants under the HECap program, some grants under the HEAL NY grant program, capital projects at the City University of New York senior college facilities and community college facilities, grants under the Excel program, contributions to the costs of the remediation of hazardous waste sites, various environmental infrastructure projects and water pollution control projects.

New York Environmental ahead

Also out of the Empire State, the New York State Environmental Facilities Corp. is slated to sell $510.6 million of series 2011B state clean water and drinking water revolving fund revenue bonds (Aa1/AA+/AA+) through Morgan Stanley & Co. Inc. and Jefferies & Co. That deal is also scheduled for pricing on Thursday.

Those bonds also feature serial maturities. They mature from 2012 to 2041.

Proceeds will be used to provide financial assistance to the New York City Municipal Water Finance Authority for water pollution control and drinking water projects and to refund existing debt.

Omaha powers up deal

Another offering scheduled to come to market on Thursday is a $150 million sale of series 2011A electric system revenue bonds (Aa1/AA/) from the Omaha Public Power District.

The bonds will be sold through Goldman Sachs & Co. and Bank of America Merrill Lynch. They are due 2014 to 2022.

Proceeds will be used to make upgrades to the city's electric system and to refund its series 2002B, 2003A and 2005A bonds.

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